UPDATE 1-Brazil's BRF shares rise after strong quarterly results, positive demand and cost outlook

(Updates headline, and recasts to focus on share performance, adds analyst comments)

By Ana Mano

SAO PAULO, Feb 27 (Reuters) -

Shares in Brazilian food processor BRF SA rose almost 6% in late morning trading on the Sao Paulo stock exchange after the company reported strong fourth quarter results.

In a call with analysts to discuss financial performance on Tuesday, BRF executives indicated the company will maintain momentum, with healthy margins likely to last throughout the first quarter of 2024 thanks to an ongoing recovery of meat prices and lower grain costs.

A fall in corn prices, along with operating improvements such as lowering inventories and focusing on the sale of higher value processed products, has made the company leaner and more competitive, executives said.

At the same time, proceeds from a 5.4 billion real ($1.09 billion) follow-on share offering cut BRF's leverage to the lowest level in seven years, management noted.

On Monday, BRF said it had broken a seven-quarter losing streak and posted a net profit for the final quarter of 2023.

The company highlighted a recovery of export markets and said the outlook remained positive for international meat sales as multiple BRF plants have recently received permission to sell pork and poultry products abroad. Domestically, lower inflation in Brazil will likely improve demand on the local market, where meat consumption levels have been better yet not "ideal," said CFO Fabio Mariano.

XP analysts said they expected "demand on the domestic market to sustain margin recovery, which was delivered along with better cash flow prospects on lower inventories and sequentially better cash financial results."

But the real surprise came from international market performance, they said.

"The international operation took the spotlight with price recovery across the board," XP analysts wrote in a note to clients.

($1 = 4.9613 reais) (Reporting by Ana Mano)